AFE Test ! Complete Guide PDF

**Afe complete** **Unit 1: The Economics and Overview of Life Insurance** **Which of the following is a primary purpose of life insurance in economic development?** **What is the main difference between social and private insurance?** **The concept of \"human capital\" in life insurance refers t...

**Afe complete** **Unit 1: The Economics and Overview of Life Insurance** **Which of the following is a primary purpose of life insurance in economic development?** **What is the main difference between social and private insurance?** **The concept of \"human capital\" in life insurance refers to:** **Which of the following best defines \"adverse selection\"?** **What is one of the determinants of life insurance consumption?** **Which of the following is a key difference between life insurance and annuities?** **What role does life insurance play in economic stability for families?** **Market imperfections in life insurance can lead to:** **Unit 2: Life Insurance Products** **Which feature allows a term life insurance policyholder to switch to a permanent policy without proof of insurability?** **Universal life insurance provides which of the following unique features?** **What distinguishes whole life insurance from term life insurance?** **A no-lapse guarantee in universal life insurance ensures that:** **Variable life insurance differs from traditional whole life insurance by:** **Endowment insurance is designed to:** **Which rider increases the death benefit if the insured dies as a result of an accident?** **Unit 3: Retirement Products** **An annuity primarily serves the purpose of:** **A guaranteed lifetime withdrawal benefit (GLWB) offers:** **What is a characteristic of fixed annuities?** **What is one advantage of an inflation-indexed annuity?** **A contingent deferred annuity differs from a standard annuity by:** **Which of the following describes a substandard mortality annuity?** **The purpose of a market-value adjusted annuity is to:** **Unit 4: Health Insurance Products** **What is the primary purpose of deductibles in health insurance?** **Coinsurance in health insurance is best described as:** **The primary reason for adverse selection in health insurance markets is:** **Group health insurance differs from individual health insurance in that:** **Which of the following is a characteristic of disability income insurance?** **Long-term care insurance primarily provides coverage for:** **Which type of individual medical expense policy pays a fixed amount per day of hospitalization?** **What is the impact of the Affordable Care Act on private health insurance?** **Unit 5: Life Insurance Company Operation** **The primary role of the board of directors in a life insurance company is to:** **What is an essential characteristic of a life insurer's assets?** **Which of the following is NOT a common risk faced by life insurers?** **Liquidity risk in life insurance refers to:** **Enterprise risk management (ERM) in life insurance companies aims to:** **Unit 6: Marketing** **Market segmentation in life insurance marketing refers to:** **What is a key advantage of using affiliated distribution channels in life insurance?** **Direct response channels in life insurance primarily involve:** **Which compensation method is commonly used in life insurance marketing?** **Which of the following trends is affecting life insurance distribution?** **Unit 7: Underwriting** **The purpose of underwriting in life insurance is to:** **Adverse selection in underwriting refers to:** **Which of the following is a primary source of information for underwriters?** **The primary objective of underwriting is to:** **Reinsurance is used in life insurance underwriting to:** **Unit 8: Regulation and Taxation** **The purpose of government regulation in life insurance is to:** **The McCarran-Ferguson Act is significant because it:** **The National Association of Insurance Commissioners (NAIC) primarily:** **Which of the following is a major area of state regulation in life insurance?** **What is the purpose of the Deferred Acquisition Cost (DAC) tax?** **Unit 9: Financial Reporting and Management** **What is the main difference between statutory accounting principles (SAP) and generally accepted accounting principles (GAAP) in life insurance?** **Which of the following is a primary component of a life insurer's financial report?** **Capital requirements for life insurers are intended to:** **Asset-liability matching is essential for life insurers because:** **The purpose of solvency surveillance in life insurance financial supervision is to:** **What is the function of the Interest Maintenance Reserve (IMR) in a life insurer's financial statements?** **The principles-based approach to financial reporting emphasizes:** **Financial risk management in life insurance companies primarily involves:** **Unit 10: Actuarial Fundamentals and Applications** **Mortality tables are essential in life insurance because they:** **A net single premium is best defined as:** **The law of large numbers in actuarial science is important because it:** **What is the primary use of probability concepts in life insurance?** **Which of the following best describes the present value concept?** **In calculating reserves, the retrospective method:** **What is the main purpose of actuarial assumptions in determining reserves?** **What does the term "gross premium rate structure" include?** **Unit 11: Life Insurance Due Care** **What is a key factor when evaluating a life insurance advisor?** **Assessing a life insurer's financial strength is important because:** **Which of the following is a primary role of rating agencies?** **Which of the following is a characteristic of a professional life insurance advisor?** **In the absence of regulatory intervention, what may happen if an insurer faces financial difficulty?** **In the context of life insurance, "insurable interest" refers to:** **In contract law, the term "consideration" in life insurance refers to:** **Which clause protects the policyholder\'s ability to maintain the insurance contract?** **The main goal of the entire contract clause in life insurance is to:** **Unit 12: Life Insurance in Financial Planning** **The role of life insurance in personal financial planning is primarily to:** **Human capital risk in financial planning refers to:** **Which tax rule affects the use of life insurance in estate planning?** **What is the purpose of an irrevocable life insurance trust (ILIT)?** **Qualified employer-sponsored plans are significant because:** **Unit 12: Life Insurance in Financial Planning (continued)** **Which of the following is an advantage of using annuities in retirement planning?** **What is a key disadvantage of annuities in retirement planning?** **Which is a major tax advantage of life insurance policies in retirement planning?** **In estate planning, which asset typically increases the gross estate value if owned by the decedent at death?** **The main benefit of using a life insurance policy for business continuity planning is:** **What is the purpose of a "key person" insurance policy?** **Split-dollar life insurance arrangements are often used to:** **An executive bonus plan in life insurance provides which of the following?** **Which life insurance policy structure is often used to provide nonqualified deferred compensation?** **In business succession planning, what is the primary function of a buy-sell agreement funded by life insurance?** **General Knowledge and Review** **The primary objective of life insurance fundamentals is to:** **Which of the following best describes the purpose of reinsurance for an insurer?** **Which term refers to the estimated financial value of an individual\'s earning capacity?** **Life insurance helps promote financial stability in families by:** **What is the function of policy illustrations in life insurance?** **Which measure compares the cost of life insurance policies with similar features?** **When conducting a life insurance policy review, which factor is essential to evaluate?** **In a buy-sell agreement funded by life insurance, which event typically triggers the policy payout?** **A common strategy to ensure sufficient retirement income using life insurance involves:** **What is an ethical consideration for life insurance agents in the sales process?** - A) Offering only the highest commission products - B) Recommending policies based on age rather than need - **C) Acting in the client's best interest, prioritizing their needs and goals** - D) Selling additional riders regardless of client preference **Which of the following is a primary goal of the National Association of Insurance Commissioners (NAIC)?** **The primary reason for using mortality and morbidity tables in life insurance underwriting is to:** **The cash value of a whole life insurance policy increases over time primarily due to:** **Which of the following policies is most suitable for providing estate liquidity upon the death of the second spouse in a married couple?** **In life insurance, a "waiver of premium" rider typically applies in the case of:** **What is a key function of the Financial Accounting Standards Board (FASB) in the life insurance industry?** **A "nonforfeiture provision" in a life insurance policy allows the policyholder to:** **Which of the following allows life insurance companies to hold funds and invest in a diversified portfolio for policyholders?** **Which actuarial method is primarily used to calculate policy reserves?** C\) Cash basis accounting method **The main benefit of using a paid-up additions dividend option in a participating life insurance policy is that it:** **What is the effect of increasing interest rates on the cash value of a universal life insurance policy?** **An "insurable interest" must exist at which point in time for a life insurance policy to be valid?** **Which provision allows a policyholder to receive a portion of the death benefit early if they are diagnosed with a terminal illness?** **The purpose of a "war exclusion" in a life insurance policy is to:** **Under the Modified Endowment Contract (MEC) rules, a policy that fails the 7-pay test:** **Which type of insurance coverage is typically used by businesses to compensate for potential losses due to the death of a key employee?** **In estate planning, the federal estate tax exclusion is used to:** **What does a cash surrender value option provide to a policyholder?** **Which is NOT a common factor influencing the need for life insurance?** **The cash value in a life insurance policy primarily represents:**